At long last, former Russian president and notorious booze-hound Boris Yeltsin dies

The Article: To stem the tide of ‘everyone respects the dead’ type obituaries for Boris ‘Yogi Bear’ Yeltsin (for an example, see CNN’s obituary/article), Matt Taibbi writes in the Low Post of Rolling Stone a rather biting piece on the drunk that finally croaked, entitled Death of a Drunk.

The Text: Boris Yeltsin was always good for a laugh, which is probably why on the occasion of his death people outside of Russia are not calling him words like scum and monster, but instead recalling him fondly, with a smile, as one would a retarded nephew who could always be counted on to pull his pants down at Thanksgiving dinner.

Like most people who lived in Russia during the 1990s — and Russia was my home throughout Yeltsin’s entire reign as Russian president — I have a wide variety of fond memories of the Motherland’s drunken, bloblike train wreck of a revolutionary leader. My favorite came in 1995, at a press conference in Moscow, when a couple of American reporters perfectly captured the essence of Yeltsin by heckling him as he stumbled into the room. As he burst through the side entrance with that taillight-red face of his, hands wobbling in front of him in tactile search of the podium, the two hacks in the back called out: “Nor-r-r-r-r-r-m!” Such a perfect moment, I almost died laughing. Boris Nikolayevich, of course, was too wasted to hear the commotion at the back of the room.

Boris Yeltsin probably had more obituaries ready in the world’s editorial cans than any chronically-ill famous person in history. He has been dying for at least twenty consecutive years now — although he only started dying physically about ten years ago, he has been dying in a moral sense since at least the mid-Eighties. Of course, spiritually speaking, he’s been dead practically since birth…I once visited Boris Yeltsin’s birthplace, in a village in the Talitsky region of the Sverdlovsk district in the Urals, in a tiny outhouse of a village called Butka. I knocked on the door of the shack where Yeltsin was born and stepped in the soft ground where his room had once been. Boris Yeltsin was literally born in mud and raised in shit. He was descended from a long line of drunken peasants who in hundreds of years of non-trying had failed to escape the stinky-ass backwater of the Talitsky region, a barren landscape of mud and weeds whose history is so undistinguished that even the most talented Russian historians struggle to find mention of it in imperial documents. They did find Yeltsins here and there in the Czarist censuses, but until the 20th century none made any mark in history. The best of the lot turned out to be Boris’s grandfather, a legendarily mean and greedy old prick named Ignatiy Yeltsin, who achieved what was considered great wealth by village standards, owning a mill and a horse. Naturally, the flesh-devouring Soviet government, the government that would later make Boris Yeltsin one of its favored and feared vampires, liquidated Ignatiy for the crime of affluence, for the crime of having a mill and a horse.

In those early days of the revolution, you see, the most worthless, drunken and lazy of the peasants became temporary big-shots with puffed-up communist titles and accompanying important-looking little red vinyl badges just by ratting out the rich farmers, called kulaks, of which Ignatiy was one. They would “razkulachivat” (de-kulak) the kulaks by denouncing them to the secret police and having them sent to prison camps — and once they were safely gone, the little bastards would appropriate the boss’ shit for themselves and spend their days getting drunk in his haystacks, a peasant version of paradise on earth.

That was what Marxism looked like in the 1930s in Russia. Boris Yeltsin’s father Nikolai saw this happen to his family and so he moved away from Butka, to the city of Kazan, to work construction at the site of a machine-building plant. During that time the Yeltsin family lived in a workers’ barracks where men, women, children and the elderly slept on top of each other like animals and fought, literally fought, with fists and lead pipes, for crusts of bread, or a few feet of space upon which to sleep at night. The communist government found its leaders among the meanest and greediest of the children who survived and thrived in places like this. Boris Yeltsin was such a child. As a teenager he only knew two things; how to drink vodka and smash people in the face. At the very first opportunity he joined up with the communists who had liquidated his grandfather and persecuted his father and became a professional thief and face-smasher, rising quickly through the communist ranks to become a boss of the Sverdlovsk region, where he was again famous for two things: his heroic drinking and his keen political sense in looting and distributing the booty from Soviet highway and construction contracts. If Boris Yeltsin ever had a soul, it was not observable in his early biography. He sold out as soon as he could and was his whole life a human appendage of a rotting, corrupt state, a crook who would emerge even from the hottest bath still stinking of booze, concrete and sausage.

It’s worth noting that Yeltsin’s future political adversary, Mikhail Gorbachev, grew up in almost identical conditions of mud, misery and starvation in the Stavropol region. But while Gorbachev’s childhood turned him into a pathologically self-hating wannabe, a scheming, two-faced party intellectual who privately lusted after French villas and foreign-tailored suits and would eventually be undone by his habit of parading in public with a wife who wore jewels and furs, Yeltsin never left the mud and never tried to. He remained a mean, thieving country drunk his whole life.

Some historians will disagree, pointing to the fact that in the end, Yeltsin held huge Swiss bank accounts, sent his grandkids to school in Europe and was rich beyond Gorbachev’s wildest dreams, but those people misunderstand what it is to be a sovok, or pure Soviet philistine, as Yeltsin was. The swelling Swiss bank accounts that Boris Nikolayevich lived off of as he drank his gurgling elderly self to death in the last eight years were just a modern version of the stolen haystacks the lazy Butka peasants slept on eighty years ago. Like them, Yeltsin stole whatever he could get his hands on and then lived out his days rolling in his bounty like a human pig — because a sovok doesn’t know how to enjoy anything except to roll around in it like a pig. Yeltsin was just better at it than the rest of his peers. And he survived longer than the rest of them because his “life” was, until today, just a biological technicality — it is hard to kill what has, inside, been dead all along.

Everything about the historical figure Boris Yeltsin reeked of death and decay; it was his primary characteristic as a human being. I remember clearly talking with former general and Secretary of the Security Council (who served under Yeltsin) Alexander Lebed at Lebed’s dacha in Siberia — here is what Lebed had to say about Yeltsin the man:

He’s been on the verge of death so many times…His doctors themselves are in shock that he’s still alive. Half the blood vessels in his brain are about to burst after his strokes, his intestines are spotted all over with holes, he has giant ulcers in his stomach, his heart is in absolutely disgusting condition, he is literally rotting…He could die from any one of dozens of physical problems that he has, but contrary to all laws of nature — he lives.

I still remember the way Lebed pronounced the word “rotting” — gnilit — scrunching up his smashed boxer’s nose in moral disgust. He was shaken by the memory of just having been near Yeltsin. This from a hardened war veteran, a man who had coldly taken lives from Afghanistan to the Transdniester. The stink of Boris Yeltsin was the first thing capable of giving Alexander Lebed shell-shock.

Yeltsin outlived Lebed, a physically mighty man who could break rows of jaws with his fists but was chewed up and spit out like a sardine when he took on the Russian state. He likewise outlived the Petersburg Democrat Galina Starovoitova, the reporter Anna Politkovskaya, the muckraker Artyem Borovik, the Duma deputy Yuri Shekochikhin, the spy Alexander Litvinenko — they were all too human in one way or another for today’s Russia, and died of unnatural causes at young ages, but not Yeltsin. While all of those people were being murdered or dying in mysterious accidents, Yeltsin spent his golden years in an eerie state of half-preserved, perpetual almost-death. I saw an intern cutting video for a Yeltsin obit at my father’s offices at NBC Dateline a full ten years ago. They expected him to go at any minute. He didn’t. A few years later Yeltsin got sick and again the papers here and in Russia prepped the obits. He survived, and his handlers — people like the ball-sucking Valentin Yumashev (the real author of at least two Yeltsin “autobiographies,” by the way) — tried to prove to the Russian people (and Yeltsin’s enemies) that the boss was still viable by releasing video footage on state channel ORT of the prez driving a snowmobile in the country. I remember that footage, it was one of the funniest things ever put on television. I am certain that they stapled Yeltsin’s hands to the handlebars; the boss had a blank face and a little ski-hat and seemed crudely propped up on the snowmobile seat. They gave him a push and Yeltsin drifted aimlessly across the snow. The footage lasted for about ten seconds and the last thing you saw was Yeltsin’s back. So much for the death-watch.

This pattern repeated itself over and over again, and eventually I got so fed up with it that, when he got sick again in 1999, I ran a cover in my Moscow newspaper The eXile that showed a picture of a wobbling Yeltsin over the headline, “DIE, ALREADY!!!” But he didn’t. He survived and lived to turn over power to the next vampire, the Thief Mark VII, Vladimir Putin. Then he disappeared somewhere to spend seven glorious years drinking himself to death — a Soviet version of Leaving Las Vegas, set in Switzerland and the south of France. Like all the great Russian monsters, like Stalin and Lenin and Brezhnyev and Andropov and a million other czars big and small, he died peacefully of natural causes while murders raged all around him, a piece of fat noiselessly clogging his heart while he slept in his stolen bed.

The obituaries this morning I read with great amusement. Here is a line from the Associated Press:

Yeltsin steadfastly defended freedom of the press, but was a master at manipulating the media…

Boris Yeltsin, defender of the freedom of the press! That should be news to Dmitri Kholodov, erstwhile reporter for Moskovsky Komsomolets, who was killed by an exploding briefcase in 1994 while investigating embezzlement of the Western army group connected with Yeltsin’s close drinking buddy, then-defense minister Pavel Grachev. The day after Kholodov was killed, Yeltsin got up on national television and called Grachev “one of my favorite ministers.” That was what Yeltsin thought of reporters and the free press.

Here’s another line from the Yeltsin obit:

But Yeltsin was an inconsistent reformer who never took much interest in the mundane tasks of day-to-day government and nearly always blamed Russia’s myriad problems on subordinates…

“Inconsistent reformer” is exactly the kind of language the American media typically used when describing Yeltsin during a period when he and his friends were robbing the Russian state like a gang of New Jersey truck hijackers. When I sent bits of this obit to a friend of mine who had also been a reporter in Russia during Yeltsin’s reign, here’s what he wrote back:

Yeah, it’s a hoot. He simply had no power, for example, to prevent the misuse of the $1-$3 billion a year that his tennis partner at the National Sports Fund (Shamil Tarpishev) was getting from duty-free cigarettes…much of which inexplicably ended up in his daughter’s foreign bank accounts.

What we were calling “reform” was just a thinly-veiled mass robbery that Yeltsin perpetrated with American help. The great delusion about Yeltsin was that he was a kind of Democrat and an opponent of communism. He was not. He was, like all politicians who grew up in that system, an opportunist. He read the writing on the wall and he threw his weight behind a “revolution” that turned out to be a brilliant ploy hatched by a canny group of generals and KGB types to privatize Soviet assets into the hands of the country’s leaders, while simultaneously cutting the state free of its dreary obligations toward the rank-and-file Russian people.

The word “corruption” when applied to Boris Yeltsin had both specific and general applications. Specifically he personally stole and facilitated mass thefts at the hands of others from just about every orifice of the Russian state. American journalists, when chronicling Yeltsin’s “corruption,” generally point to minor cash-bribery deals like that involving the Swiss construction company Mabetex, which was given the contract to renovate the Kremlin in exchange for cash payouts to Yeltsin (at least $1 million to a Hungarian bank, according to some reports) and no-limit credit cards in the names of his two daughters, whose bills ultimately were paid by Mabetex. (According to reports, charges on the Eurocards in the names of the two women ran to $600,000 in 1993 and 1994 alone). This is the kind of simple, Boss-Tweed/Tammany Hall corruption that Americans understand, and in the eyes of most of the Western world, for a Yeltsin to dip his beak in a few million here and there in the midst of such a violent societal transformation was not really a big deal. A guy’s gotta get paid, right?

Well, not exactly. What Americans missed during Yeltsin’s presidency — and they missed it because American reporters defiantly refused to report the truth of the matter — was that under Boris Yeltsin the Russian state itself became little more than a cash factory for gangland interests. This was corruption on the larger scale, a corruption of the essence of the state, corruption at the core. Some of the schemes hatched by Yeltsin’s government were so astonishing and audacious in scope that they almost defy description.

The FIMACO scandal was a great example. An extraordinarily complex affair, the broad strokes go as follows: in the midst of a Russian financial crisis in 1998, Yeltsin’s government received $4.8 billion of an eventual $17 billion loan from the IMF. Shortly after receiving that money, two things happened; the ruble devalued, and huge masses of hard currency mysteriously fled Russia. IMF officials were subsequently forced to make statements along the lines of “IMF director Michael Camedessus emphasized that there was no proof of a link between these operations and IMF loans,” even though everyone knew exactly what had happened.

Subsequently, huge masses of the IMF money appeared in the accounts of a tiny Jersey Islands-based company called FIMACO, which had started with only $1,000 in capital. FIMACO then began buying up huge masses of Russian T-bills, also known as GKOs. The Russian state, in other words, was stealing hard currency from the West — if you go back far enough, from you and me — and using that money to artificially create market demand for its own securities.

Here in America we call that kind of economics a pyramid scheme, and that is exactly what the Russian treasury was used for during those years. The state’s coffers under Yeltsin were ritualistically raided for mass orgies of self-dealing, filtering tax revenues through tawdry offshore accounts, chiefly using two classes of people — Westerners and the Russian public — as marks in the con. It is worth noting that the economic crash that ensued after the theft of this IMF money (and the collapse of the pyramid-pumped T-bills) left more than 11 million Russians unemployed, an extraordinary amount when compared to the less than two million Americans who lost jobs after the 1929 crash. So we know who the victims were.

The beneficiaries? Well, in 1999, reports surfaced that a company belonging partially to Yeltsin’s daughter, Tatiana Dyachenko, had received a payment into its Australian bank account of $235 million, and that that money had been taken from the $4.8 billion IMF credit. Maybe that was the carrying charge for the FIMACO transaction, who knows. The source for that story was Viktor Ilyukhin, a much-despised “dirty commie,” as one friend of mine described him, but the details still ring true, if only because we ended up hearing so many similar stories with similar endings before Borya and his daughters stepped down from the throne.

In addition to those payments, we also now know that the revenues from FIMACO’s T-bill machinations were used for all sorts of ill deeds, including the financing of election campaigns. There are even stories suggesting that Yeltsin himself received funds for his re-election from other T-bill scams.

Ah, yes — Yeltsin’s elections. The proof positive that Our Man in Moscow was a “Democrat.” There were two big ones, the constitutional referendum of 1993 and the re-election of 1996. About the referendum it is worth saying only that evidence has surfaced suggesting that that vote was rigged and that Yeltsin actually lost — but he got away with it, and the vote was close anyway, so mazel tov.

But 1996 was a historic event. The short version of the story is that Yeltsin originally looked likely to lose the election to the dreary communist Gennady Zyuganov. Panicked, Yeltsin’s cronies, in particular privatization chief Anatoly Chubais, brokered (at Davos in 1995) a deal with the seven chief “bankers” of the new Russia, gangsters like Mikhail Khodorkovsky and Vladimir Potanin and Vladimir Vinogradov, who were really Russia’s version of the five families. In exchange for their massive financial and media support (these men owned most of the new Russian media outlets) in the election, Yeltsin would hold a series of auctions of state properties called “Loans-for-Shares.”

Essentially, Yeltsin agreed to a sell-off of Russia’s major industries, in particular the great state oil and energy companies, for pennies on the dollar. In some cases, Yeltsin’s government even lent the money the mobsters needed to make their bids. Bank Menatep, for instance, run at the time by Khodorkovsky, had $50 million in Finance Ministry funds transferred into its accounts just before it submitted the winning bid of $100.3 million for the oil giant Yukos, control of which of course was worth at least ten times that amount. Yukos eventually grew into one of the most powerful private companies in the world, but few people know it was born as a back-room favor in an election season.

Yeltsin, in other words, single-handedly created a super-gangster class to defend his presidency against an electoral challenge. He had also restored a system of despotic government-by-tribute that had reigned in Russia for centuries and even throughout the worst years of Soviet rule. In Russia there survives a style of leadership dating back to the local Khans of the East in which the leader is a pathologically greedy strongman who takes everything for himself, and then rules by handing out “gifts” to an oligarchy of ruthless underlings dependent upon his political survival. Stalin himself, an ethnic Georgian, used to physically re-enact this political style by walking around the room during feasts and breaking off pieces of chicken or hunks of mutton for his more important guests. Without me, you don’t eat; with me, you eat good…Americans will recognize this form of rule because they see it every Sunday night in The Sopranos. You send the envelope upstairs every week, rain or shine (had a fire? Fuck you, pay me!), and once in a while the boss buys you a Hummer. That was Russia after 1996. Loans-for-shares formalized Russia’s transformation from a flailing Weimar democracy into an organized mafia state; Boris Yeltsin was the Don.

And the Don had a lot of funds to play with. Back in 1993, Yeltsin created the Kremlin Property Department and decreed that all assets that had once belonged to the Soviet Communist Party now belonged to this office. Assets included everything from dachas to resorts to foreign property and cash, jewels, paintings, practically everything of value the Soviet state owned, minus its industrial holdings (and even a few of those, including the “Rossiya” airline). He then placed his buddy, Pavel Borodin, in charge of the office. Borodin was a fat pig and a crook to the bottom of his shoes; he was the man who brokered the Mabetex construction deal, the one that landed Yeltsin’s daughters the magically repaid Swiss credit cards. Borodin once estimated that the Kremlin Property Department had over $600 billion in assets — twice the size of Russia’s GDP in the last year of Yeltsin’s reign. He had over 3 million square meters of office space in Moscow alone. Basically, whenever Yeltsin needed to send a gift to a “friend,” he picked up the phone and called Borodin. Give X this dacha, Y that river property overlooking the Kremlin, etc…It just never ends, the corruption tied to Yeltsin. That’s why the Kremlin Property Department was so frequently described as an “octopus.” Its legs were everywhere.

Let’s not forget also Yeltsin’s role in starting two wars in Chechnya. Obviously there were political reasons for starting both wars, some of them possibly even legitimate, but at their roots both Chechen conflicts ended up basically being bloodbaths and cash boondoggles. Americans who follow the contracts handed out to the likes of Bechtel and Halliburton in Iraq understand the dynamic here. Only in America, the companies at least have to build something for the money they get. In the case of Chechnya it was simpler; Yeltsin could simply hand Chechen Reconstruction Funds to an “authorized bank” that would be trusted to distribute them, and the money would just disappear.

Bank Menatep, for instance, was trusted with the task of supplying food to the military, cleaning up Chernobyl and rebuilding destroyed areas of Chechnya. According to state auditors, over $4 billion dollars disappeared in the accounts of these “authorized banks.” One auditor told stories of seeing a piece of Finance Ministry paper in which 500 billion rubles of Chechen Reconstruction money was transferred to a single individual, for no apparent reason…

Meanwhile, in Chechnya, undermanned teenage Russian soldiers — straight from being sodomized and forced to suck off drunken officers during the notorious dedovschina hazing period of basic training — would be forced to sell socks and blankets and even rifles to the enemy to pay for the food their commanders now no longer had money to buy. And when that didn’t help military morale enough to secure victory, the state would simply cut costs and drop fuel-air “vacuum bombs” on Chechen civilian areas as a way of showing “progress.” Estimates of the Chechen disaster now range from 50,000 to 200,000 civilian deaths and from 10,000 to 50,000 Russian servicemen dead — an endless cycle of military stalemate, atrocities and robbery, a situation that makes the Iraq war look like the Tennessee Valley Authority.

Finally, let’s not forget perhaps the most ironic victims of Yeltsin’s reign. Few today remember that the make-or-break moment for Yeltsin as a “democratic” leader came when coal miners in places like Cherepovets and Vorkuta went on strike in support of the revolution. Yeltsin rewarded those same miners by telling them to go fuck themselves when ruthless mine owners in his newly capitalist “reform Russia” turned them into slave laborers and left them unpaid for months and years on end. I visited Vorkuta in 1998 and found the same people who had protested in favor of Yeltsin’s “democratic” revolt years before now living off tiny daily rations of rotten eggs and bacon fat. I was with one miner who brought home a single package of a boiled egg, a piece of sausage and a hunk of cheese given to him in lieu of salary at the mine, and solemnly divided it up with his wife and his two kids at dinner. The food came from past-due stocks of old food that the mine owners had traded for with a local store in exchange for coal.

Those same steam-boiler-bellied mine executives — Yeltsin lookalikes — proudly showed me a new slate pool table they had had imported from St. Petersburg that day and which they kept in the mine’s newly-furnished executive lounge, where they hung out boozing all day while everybody else worked in dangerous prehistoric conditions. I visited that mine in June of 1998; 37 people had already died in mines in Vorkuta that year.

That was Boris Yeltsin’s Russia. It was a place where pigs got fat and everyone else sucked eggs. Yeltsin wasn’t a “reformer” any more than he was a human being. He was born in a Russia where the mean ones got the house with the mill and the wood floors and the losers worked themselves to death in pits and outhouses. He left behind exactly the same country. There will be some Russians who will mourn him today, because for all his faults, he was what the Russians call nash — “ours.” With his drunkenness, his talent for making a slobbish spectacle of himself in front of the civilized leaders of the world, his apelike inability to wear a suit, his perfect and instinctive amorality, his effortless thievery, and his casual use of lethal force, he represented a type intimately familiar to all Russians. There is a famous story in Russian history in which a Russian general who has been living in France for years after the Napoleonic wars meets a fellow countryman, who has just arrived in France from home. “Well, so what are they doing in the Motherland?” the general asks. The traveler pauses, then finally answers: “Stealing.” Russia even back then was run by Yeltsins, and it will be again, even though this particular one is finally dead.

Boris Yeltsin, reformer*, 1931-2007. Sleep it off, you drunken slob.

The Analysis: In the historical context of a Russian history stuck in a perpetual autocrat machine, Yeltsin “saved Russia from dictatorship then, just like Lenin, he condemned Russia to it. And so it goes in Russia.” A part from obscure bands, a complacently ignorant media, and a cadre foreign diplomats who conjured up his legacy, the rest of the world will remember him for being a bloated, corrupt opportunist who sold his country out to tyrants.

How Wal-Mart’s TV Prices Crushed Rivals (and the Consumers Gonads)

The Article: How Wal-Mart’s TV Prices Crushed Rivals by Pallavi Gogoi in Business Week. You’ve heard of Walmart wooing the proletariat with cheap wares and bright lights, cripple local enterprise, destroying all sense of local ownership and community in rural areas, and slowly but surely sucking the worlds soul away in with low prices. And now, they’re doing it to other huge multinational corporations and electronic formats:

The Text: Last “Black Friday,” for its annual post-Thanksgiving sales blitz, Wal-Mart Stores (WMT) decided to slash the price of one of the hottest electronics items for the holidays—the 42-inch flat-panel TV—to $988. The world’s largest retailer had staked similarly audacious positions before, in numerous product categories, as part of its quest to remain U.S. retailing’s “low-price leader.” In turn, Wal-Mart’s move caused a freefall in prices of flat-panel televisions at hundreds of retailers—to the glee of many people who were then able to afford their first big-screen plasma or liquid-crystal-display model.

Now, it is becoming apparent that Wal-Mart’s calculated decision to break the $1,000 barrier for flat-panel TVs triggered a disastrous financial meltdown among some consumer-electronics retailers over the past four months.

The fallout is evident: After closing 70 stores in February, Circuit City Stores (CC) on Mar. 28 laid off 3,400 employees and put its 800 Canadian stores on the block. Tweeter Home Entertainment Group (TWTR), the high-end home entertainment store, is shuttering 49 of its 153 stores and dismissed 650 workers. Dallas-based CompUSA is closing 126 of its 229 stores, and regional retailer Rex Stores (RSC) is boarding up dozens of outlets, as well as selling 94 of its 211 stores. “The tube business and big-screen business just dropped off a cliff,” says Stuart Rose, chief executive officer of Dayton-based Rex Stores. “We expected a dropoff, but nowhere near the decline that we had.” Clearly, these retailers are taking such drastic measures because they don’t see any respite in sight.
The ‘Wal-Mart Effect’

Since early February, when the companies first started closing stores and announcing layoffs, most of their stock prices also have been battered. Circuit City shares have fallen 24%, to $18.76, since the end of November, when the price war started. In the same period, Tweeter’s shares declined 32%, to $1.72, near a 52-week low, and Best Buy’s (BBY) stock is down 9%, to $48.73. Shares of Rex Stores have been flat, down 0.7%, to $16.98 (see BusinessWeek.com, 4/9/07, “Stop the Bullying, Wal-Mart”).

The carnage has one phrase written all over it: the “Wal-Mart effect.” For many electronics competitors, the experience with flat panels has been a replay of what happened in other businesses over the past two decades as Wal-Mart’s business stature grew dramatically. The Bentonville (Ark.) juggernaut’s entry into the grocery business in the late 1980s and its ability to offer deep discounts led to the bankrupting of dozens of regional supermarkets over the next 15 years, including Florida-based Winn-Dixie Stores, Eagle Foods from Illinois, and Penn Traffic in Pennsylvania.

And Wal-Mart’s discounting of popular toys sent FAO Schwartz and KB Toys into bankruptcy. Now, Wal-Mart has clearly turned its gaze to electronics. “We recommitted to our customers that we would be their low-price leader, especially on those products that were rising in popularity, such as flat-screen and high-definition TVs,” says Kevin O’Connor, Wal-Mart vice-president and general merchandise manager.

Manufacturers Still Smarting

None in the industry doubted that flat-panel television prices would fall or that Wal-Mart would offer heavy promotions. But most expected the promotions to be limited to lesser-known brands like the Viore TV that Wal-Mart was selling at $988. What caught competitors off guard was that Wal-Mart also cut the price of a top brand name—the 42-in. Panasonic high-definition TV—by $500, to $1,294. That sent dozens of retailers across the country scrambling, and many rushed to match prices: Circuit City offered the same Panasonic TV at $1,299, while Best Buy sold a Westinghouse 42-in. LCD for $999. Others tried to lure customers to larger TVs—CompUSA gave a $500 rebate on its 50-in. Panasonic plasma for $2,499.

Panasonic executives are still smarting from Wal-Mart’s decision to drop the price on its 42-in. model. Panasonic officials won’t discuss the issue. “I’m not going to comment on what Wal-Mart did,” says Andrew Nelkin, president of Panasonic Professional Display Co. in Secaucus, N.J.

Along with Wal-Mart’s determination to lower prices, two other factors played key roles in last winter’s 40%-to-50% flat-panel price drop and the ensuing turmoil. For one, many more retailers such as Sears (SHLD) and CompUSA were starting to stock a wider selection of flat-panel TVs after seeing demand soar over the previous two years. Also, manufacturers like Samsung, Sony (SNE), Panasonic, and Westinghouse had ramped up production last year with new factories in Asia and the U.S. They began flooding the market with new TVs in the latter half of 2006. All these forces combined to make a commodity of what just six months earlier had been a solidly high-end, high-margin entertainment product. “It’s Econ 101: Best Buy and Circuit City had seen fat margins from flat-panel TVs for a while, and as it happens with any product, eventually the margins come down and the music stops,” says David Abella, a portfolio manager at New York-based Rochdale Investment Management, with assets of $2 billion.
Little to Lose

Wal-Mart is the second-largest electronics retailer today, behind Best Buy, which has fared relatively well compared to many of its rivals. But it has done so by imitating some of Wal-Mart’s best practices, most notably an efficient supply chain, by the admission of CEO Brad Anderson himself. It also has more diversified merchandise than other specialty-electronics retailers.

Despite its bold move last year, Wal-Mart currently is not the largest seller of flat-panel TVs. In fact, even though Wal-Mart set in motion the price drops, it has actually been a bit player in the high-definition TV segment. By most accounts, Wal-Mart had little to lose by dropping the price on the Panasonic TVs because it sold out its inventory nearly instantly.

However, for Circuit City, which was in the midst of a turnaround and sells thousands more flat-panel televisions than Wal-Mart, the new price landscape represented a massive hit to its margins. The Richmond (Va.) company lost $12.2 million in its fiscal fourth quarter ended Feb. 28, compared to a net income of $141.4 million in the same period last year. At Tweeter, where flat-panel TVs make up more than 51% of sales, the price declines hurt badly. Sales in its fiscal second quarter ended Mar. 31 declined 12%, to $139 million. The Canton (Mass.) company plans to release earnings on May 10. “We desperately hope that sanity reigns and that the lessons of the past holiday season are not lost on anybody in the industry,” says Joe McGuire, CEO of Tweeter Home Entertainment Group.
Luring the Technophiles

Despite shoppers paying lower prices, Circuit City CEO Phil Schoonover is hoping customers will continue to want their TVs installed and will use the company’s Firedog service, a competitor to Best Buy’s Geek Squad that launched last October. Sales at Firedog grew 80%, to $200 million last year, and Schoonover says he expects them to double this year. He admits, however, that the environment couldn’t be more uncertain. “I’m not here to say that we’re sure what the second half looks like because we have 96 suppliers of flat-panel TVs who market their products in the U.S.,” he says. “With production facilities all over the world and brands from China, we don’t know what their real marketing strategies are. We think it’s going to be a competitive marketplace for the flat-panel TV business.”

As new technology emerges and as LCD TVs with crisper images hit the market this May, some retailers are hoping to lure the technophiles. However, if consumer-electronics purveyors are hoping to maintain sky-high prices on new products, they’d better not count on it. After all, they have no idea what Wal-Mart has in store.

Analysis: Asking me if I feel sorry that Walmart is putting a dent into Best Buy and Circuit City is akin to feeling sorry for Stalin when he was attacked by Hitler. Sorry, I done did it.

I think the poison was…. Asiiiiannnn

The Article: They done did it. Yes, THEY, the Chinese, poisoned our pets: From ABCNews: Officials: Pet Food Poison May Have Been Intentional, FDA Investigators Say Chinese Companies May Have Added Melamine to Appear to Boost Protein Content.

The Text: For the first time, investigators are saying the chemical that has sickened and killed pets in the United States may have been intentionally added to pet food ingredients by Chinese producers.

Food and Drug Administration investigators say the Chinese companies may have spiked products with the chemical melamine so that they would appear, in tests, to have more value as protein products.

Officials now suspect this possibility because a second ingredient from China, rice protein concentrate, has tested positive for melamine. So has corn gluten shipped to South Africa. That means there is a possibility for another round of recalls.

The FDA’s top veterinarian, Stephen Sundlof, says finding melamine in so many products “would certainly lend credibility to the theory that it was maybe intentional.”

Melamine, which is used to make plastics in the United States and as a fertilizer in Asia, contains nitrogen. Nitrogen can appear to boost the level of protein in products.

The revelations have led the FDA to expand the number of products it is testing as they enter the United States. So far, those inspections at the border have not turned up any melamine in wheat gluten. Tainted wheat gluten used by Menu Foods is suspected in sickening hundreds, if not thousands of pets.

Some of the tainted pet food has apparently made it into feed for hogs. Federal agencies are trying to determine if it was actually fed to animals and whether it may have reached the human food supply.

Analysis: I told you so. I told you we needed to round up all the Koreans in America and turn them into pet food for the Chinese. But you scoffed and scolded me, but now who is right? Me, that’s who, and now millions upon millions of lonely, pathetic spinsters will be without their Chinese-pet-food-dependent significant others (talking dogs, cats, corpses).

Stab the Monopoly in the Heart

The Article: Spinning Into Oblivion by TONY SACHS and SAL NUNZIATO in today’s New York Times details the short-sighted nature of the Recording Industry Association of America (RIAA) — the infamous music label conglomerate that’s too busy suing college students in a hope of reclaiming profits lost from pushing terrible music for the past decade and not understanding ‘technology’.

The Text:

DESPITE the major record labels’ best efforts to kill it, the single, according to recent reports, is back. Sort of.

You’ll still have a hard time finding vinyl 45s or their modern counterpart, CD singles, in record stores. For that matter, you’ll have a tough time finding record stores. Today’s single is an individual track downloaded online from legal sites like iTunes or eMusic, or the multiple illegal sites that cater to less scrupulous music lovers. The album, or collection of songs — the de facto way to buy pop music for the last 40 years — is suddenly looking old-fashioned. And the record store itself is going the way of the shoehorn.

This is a far cry from the musical landscape that existed when we opened an independent CD shop on the Upper West Side of Manhattan in 1993. At the time, we figured that as far as business ventures went, ours was relatively safe. People would always go to stores to buy music. Right? Of course, back then there were also only two ringtones to choose from — “riiiiinnng” and “ring-ring.”

Our intention was to offer a haven for all kinds of music lovers and obsessives, a shop that catered not only to the casual record buyer (“Do you have the new Sarah McLachlan and … uh … is there a Beatles greatest hits CD?”) but to the fan and oft-maligned serious collector (“Can you get the Japanese pressing of ‘Kinda Kinks’? I believe they used the rare mono mixes”). Fourteen years later, it’s clear just how wrong our assumptions were. Our little shop closed its doors at the end of 2005.

The sad thing is that CDs and downloads could have coexisted peacefully and profitably. The current state of affairs is largely the result of shortsightedness and boneheadedness by the major record labels and the Recording Industry Association of America, who managed to achieve the opposite of everything they wanted in trying to keep the music business prospering. The association is like a gardener who tried to rid his lawn of weeds and wound up killing the trees instead.

In the late ’90s, our business, and the music retail business in general, was booming. Enter Napster, the granddaddy of illegal download sites. How did the major record labels react? By continuing their campaign to eliminate the comparatively unprofitable CD single, raising list prices on album-length CDs to $18 or $19 and promoting artists like the Backstreet Boys and Britney Spears — whose strength was single songs, not albums. The result was a lot of unhappy customers, who blamed retailers like us for the dearth of singles and the high prices.

The recording industry association saw the threat that illegal downloads would pose to CD sales. But rather than working with Napster, it tried to sue the company out of existence — which was like thinking you’ve killed all the roaches in your apartment because you squashed the one you saw in the kitchen. More illegal download sites cropped up faster than the association’s lawyers could say “cease and desist.”

By 2002, it was clear that downloading was affecting music retail stores like ours. Our regulars weren’t coming in as often, and when they did, they weren’t buying as much. Our impulse-buy weekend customers were staying away altogether. And it wasn’t just the independent stores; even big chains like Tower and Musicland were struggling.

Something had to be done to save the record store, a place where hard-core music fans worked, shopped and kibitzed — and, not incidentally, kept the music business’s engine chugging in good times and in lean. Who but these loyalists was going to buy the umpteenth Elton John hits compilation that the major labels were foisting upon them?

But instead, those labels delivered the death blow to the record store as we know it by getting in bed with soulless chain stores like Best Buy and Wal-Mart. These “big boxes” were given exclusive tracks to put on new CDs and, to add insult to injury, they could sell them for less than our wholesale cost. They didn’t care if they didn’t make any money on CD sales. Because, ideally, the person who came in to get the new Eagles release with exclusive bonus material would also decide to pick up a high-speed blender that frappéed.

The jig was up. It didn’t matter that even a store as small as ours carried hundreds of titles you’d never see at Best Buy and was staffed by people who actually knew who Van Morrison was, or that Tower Records had the entire history of recorded music under one roof while Costco didn’t carry much more than the current hits. A year after our shop closed, Tower went out of business — something that would have been unthinkable just a few years earlier. The customers who had grudgingly come to trust our opinions made the move to online shopping or lost interest in buying music altogether. Some of the most loyal fans had been soured into denying themselves the music they loved.

Meanwhile, the recording industry association continues to give the impression that it’s doing something by occasionally threatening to sue college students who share their record collections online. But apart from scaring the dickens out of a few dozen kids, that’s just an amusing sideshow. They’re not fighting a war any more than the folks who put on Civil War regalia and re-enact the Battle of Gettysburg are.

The major labels wanted to kill the single. Instead they killed the album. The association wanted to kill Napster. Instead it killed the compact disc. And today it’s not just record stores that are in trouble, but the labels themselves, now belatedly embracing the Internet revolution without having quite figured out how to make it pay.

At this point, it may be too late to win back disgruntled music lovers no matter what they do. As one music industry lawyer, Ken Hertz, said recently, “The consumer’s conscience, which is all we had left, that’s gone, too.”

It’s tempting for us to gloat. By worrying more about quarterly profits than the bigger picture, by protecting their short-term interests without thinking about how to survive and prosper in the long run, record-industry bigwigs have got what was coming to them. It’s a disaster they brought upon themselves.

We would be gloating, but for the fact that the occupation we planned on spending our working lives at is rapidly becoming obsolete. And that loss hits us hard — not just as music retailers, but as music fans.

Analysis: A bunch of international corporations creating an unstated monopoly and colluding to artificially raise prices, bankrupt small distributors and labels, and smashing any iota of independence in the music market. Thanks a lot RIAA.

Inside Iran: Picking through the complex US-Iranian relations

The Article: Matt Frei of the BBC writes in the Washington Diary about his personal experience in what he terms the viewing gallery as a journalist inside Iran. Considering everyone is having a shitbrick about the impending attack on Iran via good ole Unkey Sam (it’s amazing that he isn’t too busy molesting Iraq to get another gropey hand all over Iran’s breasts), it’s in everyone’s best interests to put aside prejudice and fear to learn a thing or two about Iran. Or not. Bombs away, toys.

The Text: Almost exactly five years ago I was lucky enough to be granted a journalist visa to Iran.

I am not being facetious.

Iranian women in Tehran test the limits of dress restrictions
Iranian women must be careful when it comes to clothing
Journalist visas are like gold dust and Iran is a memorable country to visit.

There’s the majesty of Isfahan with its blue mosques, giant squares and scented bazaars; the ancient courtyard mansions of Kashan; the sophistication of Tehran, where beautiful women are forced to wear headscarves and anoraks in public and look like supermodels masquerading as spies.

Like all other journalists I made my weekly pilgrimage to the Friday prayer meeting at Tehran University.

Tens of thousands of students and other devotees converged in what could best be described as a giant car-park covered with the kind of roof you expect to find in an aircraft hangar.

We were allowed onto a viewing gallery.

Below us, the veterans of the Islamic revolution, the heavies from the Revolutionary Guard and thousands of students wearing the white clothes of would-be martyrs listened to Iran’s spiritual leader Ayatollah Khamenei berate the Great Satan – America – and its understudy the Little Satan – Britain – for their aggression.

‘Axis of evil’

Afghanistan had already been invaded. Iraq was next on the list.

Iran had just been named by President Bush as a founding member of the axis of evil.

So, even a cursory glance at the map and American troop movements would have created a lump in the average Iranian throat.

If only the B-52 [bombers] could stop off in Tehran before going on to Kabul
Iranian man
A well-dressed man in his 30s wandered up to me. He looked angry. “How dare you call us an axis of evil?” he said in Farsi and waited for our translator to deliver every word of his diatribe.

“What about your President Bush?” he soldiered on. “He’s a top-class aggressor!”

Then he looked around and motioned me to come and stand behind a pillar.

He leant so close to me I could smell the tobacco and garlic on his breath. My personal space was definitely being invaded and I was pondering options.

“There is a joke doing the rounds,” he suddenly said in a whisper and in perfect English. “If only the B-52s [bombers] could stop off in Tehran before going on to Kabul.

“After all, it is on the way!” He motioned to the ayatollahs on the podium next to us. “We can’t get rid of them without your help!”

Chewing the fat

Later in the day I came across a similar if less brazen view.

The editor of a ‘liberal’ newspaper which had been shut down no fewer than seven times and reopened under a different name told me he approved of sanctions because they would put pressure on the regime.

Military action, he said, would be counter-productive.

We were invited to attend an editorial board meeting.

The discussion ranged from domestic issues, like the latest arrests of human rights activists, to the turmoil on Tehran’s nascent stock market and the war in Afghanistan and how the regime was not sure whether to thank the US for getting rid of its old enemy the Taleban or be afraid of Uncle Sam’s designs on the region.

As far as I could tell through the translation, the conversation was sophisticated, funny and relaxed – scribblers chewing the fat. It could have been London or Washington.

Pelted with eggs

Here’s the point: Iran is complicated, mercurial and rife with internal divisions.

Iranian students protest against President Mahmoud Ahmadinejad by holding his portrait upside-down, Dec 2006
Iran has allowed some protest against President Ahmadinejad
President Ahmadinejad is no Saddam Hussein, even if he has hosted a “Holocaust Denial” conference, and does want to develop a nuclear capability.

Saddam Hussein personally shot people he didn’t like.

The president of Iran has been pelted by unruly students with eggs and insults and no-one was shot.

I’m not saying he’s been grossly misunderstood. I am saying that Iran is far less monolithic than many in Washington like to think. The trick is to sweat out the differences.

Saddam Hussein on the gallows in an image taken from television, Dec 2006
Saddam Hussein cursed Iran as he neared death, some say
Today Iran is more isolated than it has been for a long time. Saudi Arabia, Egypt and Jordan are lining up with Israel to work against the thing they fear most – a Persian nuke.

Consider that among the last words uttered by Saddam Hussein, of all people, before the noose tightened around his neck: “Damn the Americans and damn the Persians!”

The Russians are annoyed because the Iranians won’t pay their dues on the nuclear reactor at Busher. This is hardly ideological opposition, but it’s better than nothing.

The Chinese are voting with the other members of the UN Security Council against Iran even though they can’t get enough Iranian light crude.

The pressure may be working but it isn’t enough.

Lure with iPods

If I were the US government I would issue Iran with 10,000 student visas and 1,000 technology grants to Silicon Valley.

Iran boasts five million college students with higher degrees, the largest proportion in the Middle East.

Instead of encouraging them to turn into head-bashing extremists I would seduce them into becoming head-banging, iPod-wearing computer geeks.

Faye Turney, one of the British military personnel detained by Iran
Was it wise to detain UK sailor Faye Turney and 14 others?
Unfortunately none of this will ever happen.

Even if the administration thought of it, the Democrats, flexing their muscles on Capitol Hill or positioning themselves to race for the White House, would oppose it.

They were, after all, the ones who kicked up a stink about the Dubai ports deal even though the Gulf States actually quite like America and Dubai is already the biggest US naval base overseas.

But subtlety doesn’t play well in election campaigns.

What’s more, the rhetoric coming from the US is music to Tehran’s ears.

Every time there’s a tiff the price of oil inches above $65 a barrel, making the Iranian government a little bit richer still.

So – with US Iran policy struck in a groove, Tehran thriving on adversity, an extra US carrier group in the Gulf, the Revolutionary Guards building IEDs [bombs] for Shia death squads in Iraq and the Israelis feeling distinctly twitchy about the prospect of a nuclear Iran – the stars are dangerously aligned for a show-down, even if the White House and Tehran don’t actually want one.

Now imagine “an event”, an unforeseen crisis that pushes everyone to the brink – like 15 British sailors being held hostage by the Revolutionary Guard Navy in the Shatt al-Arab waterway.

Analysis: Well, wars are coming out more frequently than iPods, so better learn a thing or two about a thing or two.